Empirical Analysis of Asset Pricing Models, Prospect Theory and Covid-19 Pandemic: Evidence from Hong Kong Stock Market

Covid-19 causes hundreds of deaths globally meanwhile it brings higher volatility on Hong Kong Stock Market which is the financial center of Asia. It attracts to investigate whether Asset Pricing Models, Prospect Theory and Covid-19 Pandemic can clearly illustrate variations in stocks returns on the market via a set of regression analysis. The empirical findings demonstrate that Hong Kong Stock Market experiences large fluctuations during the pandemic; Hang Seng Index positively relates to constructed portfolios; Government interventions such as Lockdown and Traveling Restrictions bring higher returns on the index; Crude Oil is another factor that affects the stock market negatively; Stocks with the highest previous monthly returns tend to have higher returns in the current month; Asset Pricing Models can provide assistance on assessing whether market efficiency exists in Hong Kong Stock Market.